This week’s spotlight is EUA Carbon – a market that spent the previous week grinding higher in a run of green candles, finally broke out, gave it straight back the next day, and then proved exactly why we don’t panic on the first red candle.
The set-up
We posted a full week of green candles last week, repeatedly testing the high from late July without quite breaking above it.
Monday
The break finally came, and it came with conviction – a huge green candle took EUA through the July highs (to a high of 88.53), opening the door to retest the YTD highs from late January.
Tuesday
The other side of that coin, immediately. A red candle gave back Monday’s gains and then some, smashing straight through the Marabuzo support that Monday’s breakout had left behind. Weakness down to 85.30, and the obvious question on everyone’s mind: was that the top?
Wednesday
Another red candle, but some hope for the Bulls. 84.50 was a Single Print Vacuum (SPVSingle Print Vacuum – Similar to an LVN/CLVN. A price or pri... More) level left from 7th September which came under real pressure. It was tested multiple times on the intraday chart. Not one 30-minute candle closed below it. Provided a floor from which buyers could step back in.
Here’s what we said in our report on Wednesday:
“Is that a top? It looks like the sort of thing you’d see at a top but we’d want a bit more confirmation, like, say, a break below 84.00-09.”
The low was 84.07. Then a reaction from there.
Thursday
Confirmation! A strong rally to 86.18, putting fresh Marabuzo support on the chart at 85.23. Strongly suggesting the bulls are back and we can revisit the highs.
Friday
Today we are testing the vacuum and Marabuzo resistance (86.69) left behind by Tuesday’s bear day.
Here’s the part we think matters most: after Tuesday’s sharp reversal, it would have been easy to flip to bearish on the reaction alone. We didn’t. We’d said in the reports that unless EUA closed below the 84 handle, we were keeping our ‘buy-dips’ hat on – and we stuck with it, through the red candle, through tests of 84.50.
We wanted confirmation before turning bear. It didn’t come.
Keeping our clients on the right side of the trend is one of our key mantras.
What we’re watching now:
Can we push through and test the highs again, or are we settling into a range? Either way, the 84 handle remains the line that would change our thinking – not one or two red candles.
Where are you sitting on EUA heading into next week – looking at a re-test of the highs? That would be our call.
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Clive Lambert FSTA – FuturesTechs
25 years of institutional expertise in the UK and European Energy Markets and 10-time Technical Analysis award winner. Clive provides industry-standard technical outlook, utilising Market Profile and Candlesticks Analysis for over 100 global trading desks.
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